The Maldives Government has decided to increase the GST tax rate for both the tourism sector and general sector from the new year 2023.
This is being achieved through the introduction of the Goods and Services Tax (Sixth Amendment) Act of 2022 [Law Number: 20/2022] signed into law today by the President and published in the Government Gazette.
The relevant provision of the Goods and Services Act will now bite by the tourism sector establishments in respect of:
- goods and services supplied by tourist resorts, integrated tourist resorts, resort hotels, hotels, tourist guesthouses, picnic islands, private islands, tourist vessels, yacht marinas and all such places run or operated with the approval of the Ministry of Tourism;
- goods and services supplied by shops, diving schools, spas, water sports facilities, and other such places at tourism establishments mentioned in paragraph 1 above but excluding shops operated entirely for employees of those establishments;
- goods and services supplied by travel agencies run or operated with the approval of the Ministry of Tourism;
- goods and services supplied to foreign tourist vessels entering the Maldives; and
- goods and services supplied by domestic air transporters to overseas nationals.
The legislative amendment captured in the form of a Bill was earlier passed on 16 November 2022 by the Maldives Parliament at its 39th sitting, during the third session for this year, 2022.
The revised law also explains how the tax rate would apply in the following transactions:
- If a tourist vessel is chartered for a specific period, that tax rate would apply to the full charter value.
- Where a tourist resort, resort hotel, hotel, tourist guesthouse, picnic island or private island is supplied entirely or partly (in the form of part(s) of the property / a room or villa) for a determined period for a determined price, the tax rate will apply on the full transaction value.
As a consequence of this amendment to the existing GST law, effective 1 January 2023, tourism sector GST is to become 16% and general sector GST is to be at 8%.
This is a 4% increase for the tourism sector GST and a 2% increase for the general sector GST.
The MIRA Guidance
Immediately after the publication of the law in the Government Gazette, the Maldives Inland Revenue Authority (MIRA) has issued a general circular to all registered taxpayers.
In their guidance, MIRA has advised all taxpayers to ensure that all necessary system changes are made to ensure collection of GST at the revised rates – come this new year.
Additionally, it has also stated the time of migration to the new rate as 0000 hours of 1 January 2023. Meaning to say that all supply of goods up until 11:59 hours of 31 December 2022 would be at the current rates of 12% and 6% for tourism sector and general sector GST respectively – and exactly at midnight – the country would migrate to the collection of GST at the revised new rates of 16% for tourism sector and 8% for general sector.
The tourism sector GST has had a marked and progressive escalation in the Maldives context: it was set at 3.5% at its introduction in 2011 and remained so for a brief period until end of December 2011; then it migrated to 6% till end of 2012; it increased to 8% till end of October 2014; and remained stable at 12% since 1 November 2014 until this amendment today that has raised it now to 16%.
Photo: Courtesy of Corporate Maldives